Correlation Between Analog Devices and Marvell Technology

Can any of the company-specific risk be diversified away by investing in both Analog Devices and Marvell Technology at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Analog Devices and Marvell Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Analog Devices and Marvell Technology Group, you can compare the effects of market volatilities on Analog Devices and Marvell Technology and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Analog Devices with a short position of Marvell Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices and Marvell Technology.

Diversification Opportunities for Analog Devices and Marvell Technology

-0.65

Correlation Coefficient

Analog Devices  Marvell Technology

Excellent diversification

The 3 months correlation between Analog and Marvell is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and Marvell Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marvell Technology and Analog Devices is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Analog Devices are associated (or correlated) with Marvell Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marvell Technology has no effect on the direction of Analog Devices i.e., Analog Devices and Marvell Technology go up and down completely randomly.

Pair Corralation between Analog Devices and Marvell Technology

Considering the 90-day investment horizon Analog Devices is expected to generate 3.88 times less return on investment than Marvell Technology. But when comparing it to its historical volatility, Analog Devices is 1.94 times less risky than Marvell Technology. It trades about 0.04 of its potential returns per unit of risk. Marvell Technology Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  4,038  in Marvell Technology Group on October 4, 2024 and sell it today you would earn a total of  7,234  from holding Marvell Technology Group or generate 179.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Analog Devices  vs.  Marvell Technology Group

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Marvell Technology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Marvell Technology Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Marvell Technology disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Analog Devices and Marvell Technology

The main advantage of trading using opposite Analog Devices and Marvell Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Analog Devices position performs unexpectedly, Marvell Technology can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Marvell Technology will offset losses from the drop in Marvell Technology's long position.

The idea behind Analog Devices and Marvell Technology Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.